Archive for July, 2010

We all know how credit cards try to lure you with points or rewards. The kind that you can redeem for merchandise or whatever. Why are people so drawn into quote "free" stuff? I don't think they are seeing how much they are spending to get this "free" stuff.

I have an example of someone I know personally who spent literally tens of thousands of dollars to earn enough points to trade in for a kitchaid mixer. Now I personally own a kitchaid mixer and they are quite pricey. This particular model im talking about is around $500. But to put thousands and thousands of dollars on your credit card to get this "free" item just seems ridiculous to me.

You could of saved yourself all that interest that you paid and just bought the mixer for cash. With credit cards there is no free stuff. It all has a price and unfortunately it can be a very expensive price.

What is it that you find impressive about somebody else? Clothing, home, cars, useless possessions? To me seeing somebody go into debt to buy something just so they can show off to their friends isn't all that impressive. I really don't care that you bought a new car just so you look good pulling into work. What would really impress me is if you told me you saved up for it and paid cash.

I'm sure everybody knows someone like this. They are the person that throws the cool parties every weekend but doesn't have 2 nickels to rub together.

Don't be this type of person. Be the one who sits quietly and saves his money. You will thank yourself later.

This is a subject that really ticks me off. People who buy toys and crap they don't need before taking care of their family. I personally know somebody who does this. He lives with his "girlfriend" if thats what you want to call it. Barely will ever help pay for anything for the house. Does not take care of his responsibilities. But always has plenty of money to buy stupid movie action figures. Yeah thats what I said. Action figures.

Talk about a boy living in a mans body. How is it that people can be so irresponsible?

Remember you can always buy toys and fun stuff but only after you have taken care of your responsibilities first.

Below is a copy of an email that I got. Its unfortunate that people still fall for these scams but it does happen and a lot. Basically what they are doing is telling you that they have millions of dollars in some account overseas. They are going to give you millions of dollars in return for having you transfer this money into an account in the US. But they won't give you anything until you give them some upfront money for "fees" etc. This is where the scam takes place. I have seen shows where people completely empty out their bank account trying to what they think was just helping someone. You can read below the actual email I got the other day.

I am Ms. Elaine Kilpatrick, the Auditor General, Eurotech Securities & Financial System. In the course of my auditing, I discovered a floating fund in an account which was opened in 1996 belonging to a dead foreigner Late Mr A.C.Johnson, a national of your country. I decided to track his last name over the internet to locate any member of his family hence I got in contact with you.I want to transfer the sum of $18.5M from Eurotech Securities & Financial System, in his account overseas. I am therefore writing to ask you that you quietly partner with me and providing an account or set up a new one that will serve the purpose of receiving this fund. Even an empty account can also serve as long as you prove to be honest to me till the end of the deal. I hope you will never let me down. After going through the deceased records and files, I discovered that:

(1) No one has operated this account since 2002;
(2) He died without a heir; hence the money has been floating.
(3) No other person knows about this account and there was no known
beneficiary. And if I do not remit this money urgently, it would be
forfeited for nothing.

This money can only be approved to you legally as you have the same LAST NAME. Hence I am
contacting you. I will require your urgent reply so that I give you the next step, this transaction is
100% safe. Please send me your Private/Direct Phone and Fax numbers so I reach you. I am ready to
give you the sum of $7,500,000 ($7.5M) for your assistance and partnership with me.

The following is a list of the common characteristics of the typical millionaire. This information is found in the book The Millionaire Next Door

1. They live well below their means. In general, millionaires are frugal. Not only do they self-identify as frugal, they actually live the life. They take extraordinary steps to save money. They don’t live lavish lifestyles. They’re willing to pay for quality, but not for image.

2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth. Millionaires budget. They also plan their investments. They begin earning and investing early in life. The authors note that “there is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future”. In other words, the more time someone spends buying things that look good, the less time they spend on personal finance.

3.They believe that financial independence is more important than displaying high social status. The authors spend far too much time beating home this point: usually millionaires don’t have fancy cars. They drive mundane domestic models, and they keep them for years. (There’s an entire 31-page chapter devoted to how millionaires shop for cars. It’s tedious. It may be the worst chapter I’ve ever read in any personal finance book. And the authors go on ad nauseum about the average price per pound of various vehicles. There’s even an appendix showing the average price-per-pound for the most popular models.)

4.Their parents did not provide economic outpatient care. That is, most millionaires were not financially supported by their parents. The authors’ research indicates that “the more dollars adult children receive [from their parents], the fewer they accumulate, while those who are given fewer dollars accumulate more”.

5.Their adult children are economically self-sufficient. This chapter is fascinating. The authors clearly believe that giving money to adult children damages their ability to succeed.

6.They are proficient in targeting market opportunities. “Very often those who supply the affluent become wealthy themselves.” The authors discuss how one of the best ways to make money is to sell products or services to those who already have money. They list a number of occupations they feel have long-term potential in this area.

7.They chose the right occupation. “Self-employed people are four times more likely to be millionaires than those who work for others.” There is no magic list of businesses from which wealth is derived — people can be successful with any type of business. In fact, most millionaire business owners make their money in “dull-normal” industries. They build cabinets. They sell shoes. They’re dentists. They own bowling alleys. They make boxes. There’s no magic bullet.

This is a list of the 7 reasons why its always a BAD idea to lease a car.

1. If you get in an accident and the vehicle is totaled, you’ll still be responsible to pay back the full lease contract amount. Even if the insurance company gives you back less than what you owe to the dealership, you’ll be responsible for the full amount. If you do go with a lease, at least be smart enough to buy “gap” insurance which covers you for that difference that you would owe to the dealership.

2. Many times, the lease agreement will be for 5 years/60,000 miles. So, if you go over that 60,000 and keep it until the 5 years is up, you’ll pay a penalty for every mile over 60,000 miles. Think about how many miles you put on a car each year. Most people use well over 12,000 per year.

3. If you lose a job or experience a heavy time of financial hardship and cannot afford the payment anymore, the dealership will recover the car, sell it an auction, and if they sell it for less than you owe for the lease agreement, you will be legally responsible to pay the difference.

4. The car is NOT yours, yet they still make you pay for the maintenance of it.

5.Again, you can’t claim the car as an asset. It is technically still an asset of the dealership that leased it to you.

6. A lease starts a trend of perpetually paying a car payment. If you never paid a car payment and the average car payment in America was $350 a month, putting that $350 a month in a mutual fund that made 10% would become $791,171 in 30 years. That is astonishing, and what astonishes me more is that there are people out there that will continue to defend leasing cars and financing cars with no money down because the “maintenance costs” are so much lower for a new car. Give me a break.

7. If you decide to take the option to buy the car at the end of the lease term, you’ll have paid much more than the cost of the car even if you had financed it.

Why in the world would anyone want to rent furniture? Most likely because they don't have enough money saved up to buy the furniture outright. So they resort to using those ripoff Rent-to-Own Stores. Its easy right? All you have to do is make a small payment weekly for what seems like forever.

I read an article the other day about Rent-a-Center. They had an Ashley Furniture sofa and loveseat set. It was nothing special. Their price was $26.99 a week for 104 week term. Which equals out to $2806.96. The exact same set from an Ashley Furniture store cost $1,048. That equals out to an APR of 121%. On something that only cost $1,048 why would you want to pay an extra $1759 in interest charges? I would much rather go without a sofa until I had enough money to pay for it with cash.

By thinking that consolidating your debts into a single payment is going to change your life you might want to stop and think about some things first.

Here is an example

Credit Card #1 $100/month

Credit Card #2 $70/month

Loan $250/month

So you have a total of 3 payments equaling $420 a month. With consolidation what happens is you would take out a new loan and pay each of those debts off. Leaving you with one payment of lets say $350. Sounds like a good deal right? Wrong!! You never changed your behavior and you started using those credit cards again. OOPS now you have a $350 loan payment plus 2 more credit card payments of $100 a month. Now your paying out more money each month that you were in the first place.

Now debt consolidation doesn't seem like such a good idea does it? If your not going to change your spending habits then consolidation isn't going to help you one bit.

With today being the 4th of July nothing reminds me more of this holiday than burgers on the grill and fireworks. As a kid I remember how it was. I started thinking about fireworks as soon as the snow melted in March. I have seen that pretty much all of the fireworks stands around my town accept credit cards. Seriously?? How stupid is that? Your putting something onto your credit card at 18% interest that goes up in smoke. LITERALLY.

You need to stop and ask yourself before you go out an buy a bunch of fireworks on credit. Do I really want to pay interest on something that is gone in a few seconds? I don't think so.

The best way to stay safe this 4th of July is to use cash to pay for your fireworks, it will hurt a lot less next month.

Using envelopes to keep track of your spending each month is a great way to not overspend. The concept is simple just keep your money in envelopes for things like groceries, gas, clothes etc.

I'm going to use food as an example. Lets use a family of 4 spending $600 a month on food. What you do at the beginning of the month is take $600 out of your checking account and put that money into the envelope. That money is to be used for food only. And once that money is gone its gone. If you spend it all in 2 weeks there is no taking more money from somewhere else to add to the food unless you go back and re-figure your budget.

If you are paid every 2 weeks you can fund your envelope twice a month. Even if you are paid every week you could do $150 a week into the envelope. Whatever is easiest for you as long as your not going over your budgeted amount.

Food is one of the hardest categories to estimate how much you spend. So the first few months I would over fund it. Keep track of all you spend and over the next few months it will start to become natural.

I suppose this is a question a lot of people ask themselves at the end of the month. Where did my money go? It happens all the time. Money comes in and money goes out, but where does it go?

This is where a good budget comes in handy. By writing everything down that you spend you can see exactly where all your money is going. When we started doing a budget it felt like we got a raise. We had categories for everything and it kept us from going to the ATM and taking $20 here and there. During the month it can add up to a lot of money that is wasted on stuff you can't even remember.

A budget might sound like a scary thing but all a budget does is tells your money where do go, instead of wondering where it went. Also using an envelope system for you cash purchases each month is a great way to stay on track.Sign up for my blog by emailhttp://ltj2010.wordpress.com